General Securities Representative Exam Series 7 Questions

1. Which of the following preferred issues is likely to fluctuate most in value?

2. Which of the following rights does an ADR holder not have?

3. A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of common stock. If it already has six million shares outstanding at the time of the offering.

How many rights will the corporation distribute to its shareholders?

4. A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of common stock. If it already has six million shares outstanding at the time of the offering.

What is the subscription price per share?

5. A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of common stock. If it already has six million shares outstanding at the time of the offering.

What subscription ratio is the corporation establishing for each new share?

6. Bubba owns stock with cumulative voting rights. There are five vacancies on a board and he owns 100 shares of stock. Bubba is entitled to cast the following votes:

7. The definition of debentures is:

8. Convertible bonds have all of the following features except:

9. Although a corporation has no earnings in a particular year, it is obligated to pay interest on all its outstanding debt except the following:

10. Interest rates rise from 5.10% to 5.30%. For a prospective buyer of five $1,000 bonds, what is the increase in interest payments as a result of the rise?

11. Common stocks for which of the following industries are most likely to decline in value when interest rates rise?

12. Convertible preferred stock has all of the following characteristics except:

13. Bubba buys a 5% bond that matures in 15 years with a 5.10 basis. How much did he pay for the bond?

14. Bonds are most often quoted as a percentage of:

15. Which of the following is a right for shareholders of common stock?

16. Who owns a corporation?

17. Which of the following is true of treasury stock?

18. Bubba decides to buy equity securities. Which of the following statements is always true about what Bubba is buying?

19. Which of the following securities provides the longest term of option privilege?

20. A company may pay a declared dividend in which of the following ways:

21. Bubba owns a subordinated debenture in a company that is liquidating.

When will he get paid?

22. When a corporation dissolves, who gets paid first?

23. Bubba wants to buy a $4 convertible preferred with that has a $50 par value and is exchangeable for

common stock at $47.50. If the preferred stock is trading at 52, what does Bubba calculate as the common stock price in order to be at parity with the preferred?

24. Which of the following is an analyst most likely to classify as a defensive issue?

25. Which securities do not receive dividends?

26. Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40.

What conversion ratio does Bubba determine?

27. Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40. The bond increases in value by 20 points.

What is the conversion parity of the stock?

28. The most common type of bond issued by a well-established company is:

29. A corporate bond is quoted as having a net change in value of plus one point.

By how much did the bond price increase?

30. A basis point is:

31. Bubba buys a $4 convertible preferred with a $50 par value that is exchangeable for common stock at 47.50. If the preferred stock is trading at 52 and the common stock at 51, Bubba determines that the

preferred stock is:

32. A case of leverage is:

33. Bubba holds 200 shares of common stock in a utility company and receives rights to subscribe to an

additional 100 shares at $20. The utility company is raising $40 million of new capital.

How many rights does Bubba receive?

34. Bubba holds 200 shares of common stock in a utility company and receives rights to subscribe to an additional 100 shares at $20. The utility company is raising $40 million of new capital.

How many shares of common stock for the utility company were outstanding prior to the rights offering?

35. Bubba owns a perpetual warrant to buy one share of Internet Corporation common stock at $30. Internet Corporation stock is trading at 41.50 and is ex-dividend today at $0.75.

What is the market value of Bubba’s warrant?

36. The preferred stock of Greatest Technology Corporation has a $100 par and is convertible into four shares of common stock. The preferred is trading at 104.50. The preferred is callable at 101. If the common stock price is presently 27.89, which of the following actions would be a successful arbitrage:

37. Commercial paper is typically issued with a maturity date not exceeding:

38. The minimum denomination for a US treasury bond is:

39. Which of the following has the least active secondary market?

40. Which of the following is not classified as a money market instrument?

41. Which of the following is not a characteristic of treasury bills?

42. Which of the following price quotes is representative of a treasury bill?

43. Bubba want to buy a CMO. In general, how often should he expect to receive interest payments?

44. A CMO is issued that has three tranches. One has an average life of 2 years. A second has an average life of 10 years. The third has an average life of 30 years. Initially, interest payments are distributed in this order:

45. Which of the following have a stated interest rate on the face of the certificates?

46. Bubba buys a US treasury bond. The interest he earns is:

47. Which of the following does not issue debt securities that trade in the open market?

48. When depositors withdraw money from savings institutions to invest in US treasury securities, this is

called:

49. Smart Company, Inc., has cash it intends to use in six months for purchase of equipment. The most

prudent investment during the six-month period is:

50. Which of the following is identified as a funded debt instrument?

51. A typical money market instrument carries which of the following?

52. An offering price of 102 plus accrued interest applies to which of the following securities?

53. Bubba Corporation owes income tax. Which of the following may be tendered at par value for payment of the tax?

54. An advertisement for a CMO security by a member of FINRA should disclose which of the following?

55. Which of the following statements incorrectly describes US securities markets?

56. What rate of return takes into consideration appreciation or depreciation in market value relating to the par value of a debt security?

57. Which of the following is not an attribute of US treasury bills?

58. Under which of the following conditions are homeowners most likely to refinance existing mortgages?

59. Which of the following is not true about US treasury bills?

60. CMOs are sold and priced based upon which of the following:

61. FINRA advertising standards permit a dealer to state that a CMO has an implied AAA rating if the

securities are issued:

62. What is the term applied to a classification of CMO securities having a stated maturity, average life, and estimated yield?

63. Bubba is buying a Federal Home Loan Bank issue that is offered at 95.22.

How much will he pay to purchase one bond?

64. How much currency is one mil worth?

65. Which of the following pays interest at maturity only?

66. Which of the following securities has the highest amount of market risk?

67. Which of the following is not a marketable security?

68. What type of security is quoted with a bid price of 4.72 and an asking price of 4.68?

69. Bubba is buying a treasury bill. The discount he receives results in Bubba’s determination of:

70. A treasury obligation having no fixed rate of interest with a thirty-day maturity due April 22 is most likely a:

71. Which of the following has the greatest risk?

72. Bubba wants to buy a US treasury bond with a bid of 97.28 and an asking of 98.2.

How were these prices established?

73. Which of the following are direct obligations of the US government?

74. A financial institution requesting a quote on a block of 100 bonds from a dealer in government securities receives a quote of 98.02 bid, 98.06 asked.

What is the dollar amount the institution will receive if the financial institution sells these bonds to the dealer?’’

75. Bubba plans to borrow some money and pledge securities as collateral.

Which of the following can he not use as collateral?

76. Big Easy Investment Banking, Inc., is participating in an Eastern account underwriting of $10 million of municipal bonds by agreeing to underwrite 10% of the issue. One week later, $4 million remains unsold but Big Easy has distributed $1.5 million of bonds.

What is the liability of Big Easy remaining in the account?

77. Big Easy Investment Banking, Inc., participates in a Western account underwriting of $10 million of municipal bonds by agreeing to underwrite 10% of the issue. One week later, $4 million remains unsold but Big Easy has distributed $1.5 million of bonds.

What is the liability of Big Easy remaining in the account?

78. Bubba buys “double-barreled” municipal bonds. What is the source of guaranteed repayment on these bonds?

79. Revenue bonds are least likely to provide constructions funds for:

80. What percentage of maintenance charges and debt service are covered by the rate covenant of a revenue bond issued to finance a municipal toll road?

81. Municipal bond brokers generally conduct the following:

82. Smart Guys Securities Corporation has given a workable bid to Better Guys Securities Corporation. If market conditions change, Smart Guys may:

83. Municipalities are most likely to issue notes for which of the following purposes?

84. A revenue bond is issued by a state agency. The state legislature is granted authority to apportion money to support the debt services if necessary, but is not legally obligated to do so.

What type of bond is this?

85. A group net order is one that benefits municipal syndicate members:

86. A syndicate manager has just been informed that its bid has been accepted and all syndicate members are duly notified. Public information on the award will be most quickly available from:

87. Under what circumstances may a municipal securities dealer guarantee a customer against loss in market value of bonds?

88. When pricing callable municipal bonds, the “price to call” is based upon which of the following?

89. Which of the information below does not appear in the official notice of sale?

90. Bubba buys a municipal bond at 102 and holds it ten years to maturity.

For tax purposes, how is that premium treated?

91. Bubba buys a ten-year municipal and at 102 and sells it five years later at 101.

What is tax treatment?

92. Which of the following municipal securities carries the full faith and credit of the US government for payment of interest and principal if the issuer’s funds are insufficient?

93. Bubba buys a municipal bond at a discount and holds it to maturity.

Which of the following is true?

94. Prospective bidders for a municipal bond being issued should consult what document for relevant procedures?

95. Which of the following does not appear in the official notice of sale?

96. Which of the following does not appear in a municipal syndicate letter to underwriters?

97. Which of the following sources provides news of prospective municipal securities sales to underwriters?

98. Under a leaseback arrangement used to finance construction of local schools, who is the issuer of the municipal bonds?

99. Who obtains and pays the municipal bond attorney rendering a legal opinion about the validity of the bond issue?